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Salmon, Inc. issues 505,000 shares of preferred stock for $35 a share. The stock has a fixed annual dividend rate of 5% and a par value of $14 per share. The current price of the preferred stock is $37 a share. If sufficient dividends are declared, preferred stockholders can anticipate receiving annual dividends of:
A. $0.70 per share.

B. $1.75 per share.

C. $1.85 per share.

D. $1.05 per share.

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Answer:

A. $0.70 per share.

Explanation:

Calculation for preferred stockholders anticipation of receiving annual dividends

Annual dividends= Par value × Fixed Annual dividend rate

Let plug in the formula

Annual dividends= $14 per share × 0.05

Annual dividends= $0.70 per share

Therefore If sufficient dividends are declared, preferred stockholders can anticipate receiving annual dividends of:$0.70 per share

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